DP World: How a UAE Port Operator is Quietly Reshaping Global Shipping in the Indian Ocean and Beyond

Published October 31st, 2019 - 10:26 GMT
A DP World Container Port /AFP
A DP World Container Port /AFP

 

Last Monday, Rwandan President Paul Kagame declared the Masaka Logistics Platform in the national capital, Kigali, open for business. The $35 million project aims at more closely integrating Rwanda with an expanding Central African regional economy.

Large scale infrastructure development projects in the area have long been financed and executed by the USA or multinational investment bodies, yet a new cast of actors was present at the Platform’s unveiling - dignitaries from the United Arab Emirates and representatives of Dubai’s flagship corporation, Dubai Ports World (DP World, for short).

Sultan Ahmed bin Sulayem, DP World CEO argued that the Logistics Platform, which provides services in container handling, loading and unloading and warehousing, would ‘build on our strategic partnership with the Rwandan government, empowering the Rwanda people to increase the attractiveness of the country as a key trade hub in Africa’.

Yet altruism and business nous alone do not explain the expansion of Sultan bin Sulayem’s firm.

Yet altruism and business nous alone do not explain the expansion of Sultan bin Sulayem’s firm.


DP World does far more than promote the financial interests of its investors. The state-owned logistics juggernaut serves as an important arm in Emirati attempts to project power abroad. High-profile DP World acquisitions in East Africa serve to reinforce the Emirates’ importance as a key actor in controlling trade in the Indian Ocean area. DP World lies at the heart of an increasingly activist foreign policy vision set in train by the Emirate’s ambitious de-facto leader, Crown Prince Mohammed bin Zayed Al-Nahyan (MBZ)

High-profile DP World acquisitions in East Africa serve to reinforce the Emirates’ importance as a key actor in controlling trade in the Indian Ocean area

The UAE was long seen by commentators as a minor regional power which would have to be content with playing second fiddle to larger regional hegemons. Bordering Saudi Arabia and across the narrow Strait of Hormuz from Iran, many argued that the UAE’s very survival would be contingent on cultivating alliances of protection with more significant partners.

The UAE, with a population similar to that of Honduras and a territory roughly the size of Austria, was expected to keep a low profile internationally. According to Global Fire Power, a military consultancy, the UAE’s armed forces, despite the country’s location in an increasingly precarious region, are only the 62nd strongest in the world in relation to spending, its available manpower, technological expertise, and possession of military hardware.

Compared with Saudi Arabia, with the world’s 25th strongest armed forces, Iran (14th), Egypt (12th) and Turkey (9th), the UAE appears outsized and outgunned. Yet what the UAE lacks in regard to military might and diplomatic stature, it has made up for with commercial know-how

Compared with Saudi Arabia, with the world’s 25th strongest armed forces, Iran (14th), Egypt (12th) and Turkey (9th), the UAE appears outsized and outgunned. Yet what the UAE lacks in regard to military might and diplomatic stature, it has made up for with commercial know-how.

Though exports of oil and gas have long proved central to the country’s commercial success, forward planning in the knowledge that hydro-carbon wealth would not last forever and attempts to make use another of its comparative advantages, a strategic location straddling the Persian Gulf and Western Indian Ocean, have long made the federation a key node in an expanding regional trading network.

By 2000, the UAE had emerged as the Arab world’s most globalised economy and its third largest. Crown Prince MBZ and Dubai’s ruling al-Maktoum family had long envisioned Dubai serving as a gateway linking East and West, a desire that DP World in particular has been slowly turning into reality.

By 2000, the UAE had emerged as the Arab world’s most globalised economy and its third largest. Crown Prince MBZ and Dubai’s ruling al-Maktoum family had long envisioned Dubai serving as a gateway linking East and West, a desire that DP World in particular has been slowly turning into reality.

DP World now owns more than 75 terminals on all 6 continents. Its revenues have increased by more than 50% since 2014, and it has diversified away from offering exclusively port-oriented services to more deeply penetrate the global logistics industry.

Jebel Ali, the UAE’s premier port, operated by DP World is now the busiest container port in the world outside of East Asia. A planned upgrade of the port, to be known as Dubai World Central, will make it twice as large as Hong Kong Island port and give it the capacity to move 12 million tons of freight annually. 

Jebel Ali sits at the centre of an enormous globe-spanning network of logistics hubs operated by the company. The firm’s promotion and development of Jebel Ali has helped catalyse the enormous growth of Middle Eastern maritime trade in recent years. According to Drewry’s Maritime Research, a consultancy, port volumes in the Middle East are the fastest growing in the world and are expected to surge by 5.1%, from 69 million tons annually in 2018 to 89 million in 2023.

Strategic acquisitions, most notably the purchase of P & O ports, the world’s fourth largest port operator, in 2006 has given DP World a significant foothold in both the United States and Europe. Indeed, the development of London Gateway, was seen as a significant boon for business and a key project in putting the firm on the map. In 2018, DP World significantly expanded its role in North West European logistics after acquiring Unifeeder, a Danish logistics firm.

DP World now owns more than 75 terminals on all 6 continents. Its revenues have increased by more than 50% since 2014, and it has diversified away from offering exclusively port-oriented services to more deeply penetrate the global logistics industry.

Yet while DP World’s presence in premier American and European markets have lent the firm international credibility, its main focus over the last decade has been consolidating and expanding control of key transport nodes in the Indian Ocean region.

DP World claims to be ‘ushering in a new era of global mobility and trade’ and it is in this key area that its presence is most felt. Speaking at the recent Dubai Maritime Agenda Conference, DP World’s Chief Commercial Officer Abdulla Bin Damithan described the firm’s ambition to significantly expand operations in East Africa and South Asia.

Jebel Ali, operated by DP World is the busiest container port in the world outside of East Asia /Shutterstock

Recent developments augur well in this regard.  Between 2008-2013, non-oil based trade from Dubai to Africa increased by 700%. The redevelopment of the Maputo Port in Mozambique as well as the operation of a number of DP World logistics hubs in South Africa will allow the a key commercial foothold in Southern Africa; DP World’s ownership of 5 major ports in India as well as the port of Karachi in Pakistan will help more seamlessly integrate trade between South and West Asia; while operational control of the Port of Freemantle in Western Australia helps bind together economies and business networks across the entire Indian Ocean region.

Yet within this broad region, DP World has been especially interested in expanding operations in the Horn of Africa and Red Sea region. This fits into a broader Emirati strategy in the so-called ‘New Scramble for Africa’. Exerting influence in the Horn of Africa is seen as particularly important to the achievement of two key Emirati foreign policy goals- victory over Houthi forces in Yemen and geopolitically marginalising regional rivals Qatar and Turkey.

Yet alongside these strategic interests, Emirati investors spy useful commercial opportunities in the region. A return to a semblance of political stability and security has unleashed enviable and unprecedented economic growth in the Horn of Africa. DP World has seized on a chance to play a key role in opening new markets.

In Berbera, Somaliland, DP World was granted a port development concession in 2016. DP World owns a 51% stake in the port, worth an estimated $442 million. Similarly, at Bossaso port in Puntland, P & O ports, a subsidiary of DP world owns a majority stake worth around $336 million. In both instances, UAE representatives have used such commercial opportunities to open up discussions of a more far-reaching strategic presence in the region. At Berbera, construction began in 2016 on a neighbouring Emirati military base which has been used to dispatch troops to Yemen.
 

UAE representatives have used such commercial opportunities to open up discussions of a more far-reaching strategic presence in the region. At Berbera, construction began in 2016 on a neighbouring Emirati military base which has been used to dispatch troops to Yemen

The UAE has long sought to dictate terms in the Yemeni Civil War through control of the country’s coastline. The ports of Aden, Mokha, and Mukhalla have long been key outposts for Emirati forces in Yemen. In any potential peace deal in Yemen, the UAE and its state owned businesses may drive a hard bargain to be rewarded lucrative contracts for redevelopment of key Red Sea Ports.

The UAE maintains a foothold on Perim Island, which lies at the centre of the narrow Bab al-Mandeb strait between the Horn of Africa and the Yemeni coast which it has sought to turn into strategic gain, whilst the island of Socotra, at the entrance to the Gulf of Aden has been key to Abu Dhabi’s regional ambitions.

Indeed, the UAE has already played a role in renovating the island’s main port, chartering direct flights to Abu Dhabi and providing services to its small local population. A stake in a string of emerging trading ports in the ever-important Red Sea region would give the UAE a notable edge in shaping the future of maritime trade in the region. Added to DP World’s control over the ports of Algiers and Djen Djen in Algeria, Sokhna in Egypt, just to the South of the Suez Canal, and Jeddah in Saudi Arabia, such a development would make the small Emirati federation the key actor in the globe’s most major trading avenues.

A stake in a string of emerging trading ports in the ever-important Red Sea region would give the UAE a notable edge in shaping the future of maritime trade in the region. 

On its establishment in 1971, few would have predicted the rise of the United Arab Emirates to a prominent position as a mercantile force to be reckoned with in the 21st century. But a combination of business acumen and good fortune have provided opportunities for the UAE to come to the fore as a key global logistics centre.

Taking advantage of the expansion of global trade and an enviable geographical position to escape the stranglehold of oil and gas dependency holds useful and optimistic lessons for other regional actors. Yet the expansion of the UAE’s strategic maritime presence should be treated with caution too. As the small nation increasingly monopolises the terms of trade in the Indian Ocean region, it is likely to meet with resistance from envious and well-equipped neighbors. 

The views expressed in this article do not necessarily reflect those of Al Bawaba News.


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